As you know only too well, when disaster strikes, contractors often engage in “on the spot” contracts with businesses and harried government officials who are eager to 1) get some help, and 2) show that they are on top of the situation. 

But doing business this way can be legally and ethically perilous for your business, in a variety of ways. You need to be careful.

LEGAL ISSUES

Let’s first look at the potential legal liabilities that can arise from “on the spot,” crisis-motivated contracts. (Full disclosure: While I am an attorney, I no longer actively practice.)

For starters, “on the spot” contracts can be held illegal in a variety of ways. It could be that they were made under duress, thereby giving the other party the ability to later have them voided. Or, what if the contract violates procurement regulations? Similarly, it can be said that such contracts may fail to adhere to standard bidding processes, especially when contracting with governmental entities. 

Even the rushed nature of such contracts without ensuring clarity and proper legal review may lead to misunderstandings and disputes down the road, potentially escalating into costly litigation.

And, last, but most certainly not least, the emergency nature of the event can mean that the work contracted for is done too quickly, or negligently, or worker safety is compromised. Any one of these issues can later lead to fines, litigation, invalidation, reputational damage or even financial ruin.

So let’s avoid all that. Here’s how:

PREPARATION IS KEY

Before disaster strikes, it behooves you to lay a strong foundation and that means being proactive. This can include any or all of the following:

Licensing and Certifications: Make sure that you possess all necessary licenses and certifications for the specific services you offer in your “on the spot” contract. These requirements can vary depending on the location and type of work, so thorough research is essential. 

Insurance: Having, not just the right type of insurance, but enough coverage, is vital. You will be happy you have it if you ever need it. 

Standardized Contracts: Work with your lawyer to develop your contracts, outlining the terms of engagement, scope of work, pricing, payment terms, dispute resolution procedures and termination clauses. Do not do this on your own. Having contracts created by legal counsel ensures they comply with relevant regulations and protect your interests, not the other party’s.

Pre-Qualification: Consider registering with federal agencies like FEMA or state/local emergency management bodies for pre-disaster qualification. Doing so lends your contracts more authority.

But, as indicated, legal and financial considerations are only part of the problem. There are potential ethical quagmires that need to be avoided as well.

ETHICAL ISSUES

It is too easy for the unscrupulous contractor, employee or subcontractor to exploit the vulnerability of affected communities for personal gain. And once lost, that trust between your business and the community it serves is almost impossible to regain.

So the first step to ensure that your reputation remains intact is to emphasize transparency and open communication. In your contracting, be upfront and honest about your qualifications, expertise and any possible limitations you may 

have. Clearly state costs, timelines and potential challenges. Don’t shy away from discussing potential roadblocks or unforeseen circumstances. 

Next, and it should go without saying, emphasize to your team that you will not tolerate predatory practices: Inflating prices in your contracts, doing subpar work or using the old “bait and switch” when it comes to product can only lead to problems for your business. Taking advantage of the desperation of affected communities is not only unethical but can also damage your reputation and invite litigation. 

Finally, due diligence and following procedures is necessary:

• Verify the authority of anyone signing contracts on behalf of government agencies or utilities
• Don’t rush into agreements without proper verification
• Resist the urge to bypass standard procurement processes

MOVING FORWARD

Here are a few final practical tips to enhance your disaster response contracting journey:

Network with Relevant Organizations: Work to build relationships with emergency management agencies, community groups and other disaster response stakeholders beforehand. These connections can provide valuable insights, opportunities and support when needed.

Seek Legal Counsel: Beyond your own contracts, it’s smart to have a lawyer who specializes in construction. Their expertise can help ensure your practices comply with legal requirements.

Prioritize Quality over Speed: While swift action is important, rushing contracts and neglecting proper due diligence can lead to legal trouble later. Remember, responsible practices and quality service ultimately benefit everyone involved.

Yours is a challenging profession; you do not need to be additionally challenged by legal issues. The good news is a little groundwork and a solid, ethical “on the spot” contract can almost always help avoid that.